India is on the verge of surpassing China in the Emerging Markets Index (EMI). If this happens, the Indian stock market could see a significant increase in foreign investment, leading to a potential surge in market activity. India is close to overtaking China in the MSCI Emerging Markets Investable Market Index (MSCI EM IMI), making it a top choice for investors.
India’s Weightage in Emerging Markets Index Increases
According to Reuters, Morgan Stanley has reported that India’s weightage in the MSCI EM IMI is now very close to China’s. As of August 2024, India’s weightage in the index has risen to 19.8%, almost matching China’s 24.2%. This is a significant increase from December 2020 when India’s weightage was just 9.2% and China’s was 39.1%. This rise in weightage indicates a likely increase in foreign investment, as noted by Morgan Stanley analysts led by Ridham Desai.
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Increase in Foreign Portfolio Investment (FPI)
The MSCI EM IMI includes large, mid, and small-cap stocks from 24 emerging markets. In 2024, foreign portfolio investors (FPIs) have bought $6.33 billion worth of shares in Indian markets and have been net buyers since June. This increase in investment is attributed to the stable policies under Prime Minister Narendra Modi’s government and the possibility of global interest rate cuts.
Indian Markets Expected to Continue Growing
Indian markets have seen strong performance due to heavy investments from domestic institutional investors, mutual funds, and retail investors. The NSE’s benchmark index, Nifty 50, has reached record highs, showing a 16% rise this year, which is the highest among major global indices. Ridham Desai mentioned that the current bull market is only halfway through its journey. India is expected to continue its growth, with more progress anticipated in the MSCI Emerging Markets Index. India is a top pick for Morgan Stanley and is the second most preferred destination in the Asia-Pacific region after Japan.
